The California Department of Insurance announced on March 6 a three-party settlement agreement with Consumer Watchdog and State Farm, confirming a 17 percent emergency interim rate increase for homeowners insurance policies while reducing rates for condominium and rental dwelling policies. The agreement includes refunds plus 10 percent interest to affected policyholders and extends the moratorium on non-renewals through the end of 2026.
The settlement addresses ongoing challenges in California’s insurance market following major wildfire losses that have driven up costs and impacted policy availability. The deal aims to provide stability for State Farm’s 1.2 million policyholders in the state while allowing rates to reflect underlying risk after a rate review proceeding, according to Insurify.
“The California Department of Insurance published the announcement of the three-party settlement agreement on its website. The deal resolves the rate hearing proceeding for State Farm’s emergency interim rate request that followed major wildfire losses in the state. The agreement remains subject to review by an Administrative Law Judge with a proposed decision estimated for April 7, 2026, after which Insurance Commissioner Ricardo Lara will issue a final decision. It also extends the moratorium on non-renewals for homeowners, rental dwellings, condominiums, and renters’ policies,” according to the California Department of Insurance.
State Farm is California’s largest homeowners insurer and has faced substantial claims from recent wildfire events that increased costs across the insurance market. “The settlement provides stability for these policyholders while allowing rates to reflect underlying risk following the rate review proceeding. Insurify projects: California homeowners could face an average 16 percent statewide rate increase by the end of 2026,” according to Insurify.
Recent years have seen rising homeowners’ insurance rates due to increased wildfire risk and reinsurance costs. “The settlement allows State Farm to maintain rates closer to levels needed for solvency while offering targeted relief on other property lines through refunds. Non-admitted carriers operating through surplus lines partnerships continue to provide alternative coverage options in wildfire-prone areas where admitted carrier costs are rising,” according to CalMatters.
Despite this settlement, challenges remain as more Californians turn to last-resort coverage options amid rising premiums. “California’s insurance market faces ongoing statewide challenges despite the settlement, as the homeowners’ crisis spreads to lower-risk urban areas with a 43 percent surge in FAIR Plan enrollment from September 2024 to December 2025, forcing many homeowners into costly last-resort coverage and threatening property values and community stability across the state,” according to Insurance Journal.
